Money 


and 


Currency. 


BY-V-i 


aUv’ 


A.  H.  STEPHENSON 


-AND 


G.'  F.  STEPHENS. 


“At  the  bottom  of  every  social  question  we  will  find  a social 
?;  wrong.’’ — George. 


Philadelphia: 

JUSTICE  PUBLISHING  COMPANY, 
1341  Arch  Street. 


St 


DEDICATED  1 O 

HENRY  GEORGE 

BY  TWO  MEMBERS  OF  BIS  WORLD-WIDE  CLASS  IN 


POLITICAL  ECONOMY 


CONTENTS 


CHAPTER  I. 

The  Invention  of  Money  . . . Page  $ 

CHAPTER  II. 

The  Standard  of  Value  ....  7 

CHAPTER  III. 

Private  Issues  of  Money  . . . n 

CHAPTER  IV. 

Government  Issues  of  Money  . . . 13 

CHAPTER  V. 

The  Best  Cirrency  . . . . .18 

CHAPTER  VI. 

The  Solution  of  the  Money  Problem  . 22 


pm  x \ 


Copyrighted. 


A.  R.  SAYLOR.  Tritner. 
1603  S.  Eighth  Street. 


MONEY  AND  CURRENCY. 


CHAPTER  I. 

THE  INVENTION  OF  MONEY. 

Every  form  of  wealth,  whatever  human  labor  has 
fashioned  out  of  the  inexhaustible  supply  of  raw  ma- 
terial which  we  term  land,  goes  at  the  option  of  its 
owner  for  one  of  two  purposes;  to  be  consumed  in  the 
direct  gratification  of  desire  or,  as  capital,  in  the  pro- 
duction of  other  wealth. 

Labor  is  first  exerted  to  obtain  those  benefits  which 
result  at  once,  the  day’s  needs  limiting  the  day’s  pro- 
duction, and  the  only  quality  desired  in  the  article 
produced  is  immediate  serviceableness,  utility  in  the 
simplest  sense.  But  even  so  primitive  an  economist 
as  the  sivage  who  digs  with  a stick  instead  of  his 
fingers  knows  that  wealth  may  gratify  desire  indirectly, 
the  stick  is  not  acquired  for  itseif  but  for  the  wealth  it 
will  bring  forth,  and  then  follows  the  knowledge  that 
capital  may  be  consumed  to  increase  wealth  not  only 
as  a tool  but  by  being  exchanged  for  such  wealth  as 
other  producers  will  give  for  it.  It  is  this  utility  in 
exchange,  this  barter  power,  which  is  called  value 
and  it  can  be  expressed  only  in  terms  of  some  other 
commodity. 

With  the  advance  of  trade,  the  forerunner  of  civil- 
ization, the  manifold  forms  of  wealth  involve  a count- 
less series  of  such  ratios  in  exchange.  To  be  at  home 


6 


MONEY  AND  CURRENCY. 


in  the  market  the  trader  must  learn  the  value  of  his 
own  ware  in  terms  of  every  other  article  offered  for 
barter  and  the  impossibility  of  mastering  such  a com- 
plexity of  proportions  compels  the  adoption  of  a few 
articles  as  standards  of  value,  common  denominators 
in  the  simplifying  of  ratios.  When  these  standards 
are  themselves  used  as  mediums  of  exchange,  in  order 
that  the  would-be  trader  need  not  be  forced  to  find 
another  offering  just  what  he  wants  and  wanting  just 
what  he  offers,  they  are  money,  an  invention  to  facili- 
tate exchange  by  avoiding  barter.  Value  expressed  in 
money,  utility  twice  removed,  is  called  price. 

Those  forms  of  wealth  serve  best  as  money  which  can 
be  easily  moved  from  place  to  place  and  the  common 
origin  in  many  languages  of  the  words  money  and  cattle 
shows  how  our  forefathers  met  this  necessity.  Less  clumsy 
was  the  use  of  skins  to  which  the  book  of  Job  refers  and 
when  some  genius  took  with  him  only  a clipped  corner, 
which  being  fitted  to  the  hide  from  which  it  had  been 
cut  proved  ownership,  there  was  evolved  token  money. 
But  the  material  most  widely  used  as  a medium 
of  exchange  has  been  metal,  because  it  can  be 
divided  easily  and  without  loss  of  value  and  for  con- 
venience in  handling  those  metals  have  been  pre- 
ferred which  hold  great  value  in  small  bulk,  no- 
tably gold,  silver  and  copper.  In  time  these  were 
circulated  in  pieces  whose  weight  and  purity  were  ad- 
justed by  a recognized  authority  and  secured  by  de- 
signs completely  covering  their  surfaces.  With  increase 
of  confidence  the  actual  transfer  of  such  coins  has  been 
largely  done  away  with  by  the  use  of  promises  to  pay, 
one  form  being  those  secured  by  the  pledge  of  the 
government,  promissory  notes  based  upon  such  wealth 
as  it  is  able  to  take  from  the  people. 

Such  money  as  is  current  through  a series  of  ex- 
changes is  distinguished  from  such  as  has  only  acci- 
dental or  limited  use  by  the  term  currency  and  for  all 
practical  purposes  the  money  issued  by  the  govern- 
ment is  the  only  currency  in  the  United  States. 


MONEY  AND  CURRENCY. 


7 


CHAPTER  II. 

TRIE  STANDARD  OF  VALUE. 

Strictly  speaking  money  lias  but  one  function,  to 
serve  as  a medium  of  exchange,  but  its  use  involves  an 
agreement  as  to  a standard,  a definite  amount  of  some 
particular  com  nodity  as  a measure  of  value  without 
which  money  is  impossible.  With  absolute  freedom 
of  production  and  exchange  no  reason  appears  why 
one  labor  product  is  better  for  this  purpose  than  an- 
other except  such  advantage  as  may  resuh  from  having 
a value  proportionate  to  bulk  and  by  act  of  Congress 
we  have  declared  that  25  8-10  grains  of  gold,  90  per 
cent,  pure,  shall  be  the  standard  of  value  for  the  unit  of 
currency  in  the  United  States,  the  dollar.  This  has 
nothing  whatever  to  do  with  the  determining  of  what 
material  a currency  shall  be  made  and  the  selection  of 
gold  as  the  standard  in  no  way  involves  its  use  for 
coinage  or  for  bullion  deposit  and  results  in  no  injustice. 

The  objection  is  often  made  that  gold,  being  less 
plentiful  than  some  other  metals,  can  be  more  readily 
controlled  by  speculators  who  thus  alter  at  will  the 
labor  value  of  all  debts  measured  by  the  gold  standard. 
But  it  does  not  follow  that  a large  supply  of  an  article 
assures  freedom  from  speculative  control,  for  instance, 
it  is  claimed  that  wheat  is  constantly  being  “ cornered,” 
nor  is  there  any  commodity  which  may  not  be  tempor- 
arily monopolized  when  competition  is  artificially 
limited.  As  gold  is  the  article  on  which  import  duties 
are  least  likely  to  be  imposed  it  can  only  be  cor- 
nered by  controlling  the  world’s  supply. 

If  by  any  means  competition  is  restricted  combi- 
nations against  the  consumer  are  encouraged,  the 
smaller  the  avenue  of  supply  the  more  successful  the 
conspiracy,  and,  for  this  reason  tariffs  are  justly 


8 


MONEY  AND  CURRENCY. 


denounced  as  promoting  monopoly,  but  on  the  general 
subject  of  speculation  in  commodities  there  is  a great 
deal  of  misplaced  indignation.  It  has  not  been  shown 
wherein  the  buying  up  of  the  available  supply  of  cer- 
tain goods  with  the  intention  of  selling  them  again  is 
more  disastrous  than  the  buying  up  of  the  same  goods 
with  the  intention  of  consuming  them  and  the  much- 
deplored  corners  of  the  commercial  exchanges  are 
simply  bets  upon  future  values  which  have  no  perma- 
nent effect  upon  consumers. 

With  no  tariff  upon  gold  suppose  an  attempt  were 
made  to  “ bull”  its  value.  Such  a demand  would  at 
once  be  met  by  the  withdrawal  of  gold  from  other 
uses  and  the  extension  of  gold  pr<  duction  to  less 
profitable  mines.  Any  permanent  rise  in  value  not 
due  to  natural  causes  could  only  result  from  an  agree- 
ment to  restrict  production  between  the  owners  of  gold 
bearing  lands  .the  world  over,  and  that  this  would  he 
successful  is  extremely  improbable  even  under  present 
conditions,  as  is  shown  by  the  experience  of  the  copper 
trust.  Furthermore  any  evil  results  from  such  an 
agreement  would  not  be  due  to  speculation  in  com- 
modities, but  to  private  ownership  of  land. 

Some  writers  insist  that  a commodity  should  be 
selected  as  a standard  whose  value  has  remained  nearly 
stationary  for  a number  of  years  but  as  value  merely 
expresses  a relation  it  is  hard  to  tell  just  what  this  means. 
It  is  illustrated  in  the  following  objection  to  the  gold 
standard.  Suppose  that  in  I860  an  ounce  of  gold 
exchanged  for  a coat,  but  in  1>70  the  values  of  the  two 
articles  had  changed  so  that  an  ounce  of  gold  would  buv 
two  coats  If  in  1860  A.  borrowed  from  B.  a certain 
amount  of  gold  and  returned  it  to  B.  in  1870  B.  is 
twice  as  well  off  as  far  as  coats  are  concerned  at  the 
completion  of  the  transaction  and  this  is  denounced  as 
unjust  to  A. 

A similar  illustration  has  been  widely  used  in  con- 
nection with  our  national  debt  by  showing  that,  though 
half  paid  off,  it  is  larger  now  than  ever  before  if  meas-- 


MONEY  AND  CURRENCY. 


9 

ured  in  certain  labor  products.  The  answer  to  this 
assertion  is  the  same  as  to  the  previous  one.  So  far  as 
A.  and  B.  are  concerned  had  B.  kept  his  gold  he  would 
be  in  the  same  position  in  1870  as  when  A.  pays  his 
debt.  A.  is  bound  in  equity  to  return  what  he  borrowed 
and  the  change  in  value  of  gold  as  compared  to  coats 
is  a risk  which  the  owner  of  every  commodity  incurs 
and  to  which  all  are  equally  subject.  Who  would  have 
made  up  the  loss  in  value  to  B.  had  a mountain  of 
gold  been  discovered  ? And  when  measured  by  the 
amount  of  labor  performed  there  is  no  injustice  to  A. 
in  this  illustration.  To  sav  that  an  ounce  of  s;old 
will  exchange  for  two  coats  is  to  say  that  the  effort  re- 
quired to  produce  the  gold  is  equal  to  the  effort  required 
to  produce  the  coats.  If  the  same  amount  of  labor 
would  produce  ten  coats  equity  would  demand  that  A. 
should  give  B.  ten  coats  when  the  debt  is  cancelled. 

It  is  often  urged  that  the  just  standard  of  value  is 
labor  and  not  any  commodity  but  apart  from  the  fact 
that  the  value  of  labor  fluctuates  with  every  invention 
it  is  plain  that  labor,  considered  as  to  the  only  re- 
quisite, its  effectiveness,  is  really  the  measure  when  a 
definite  quantity  of  any  labor  product  is  used  for  that 
purpose. 

The  objection  is  made  to  a commodity  standard  that 
changes  in  its  value,  though  due  to  natural  causes,  are 
like  changes  in  the  length  of  a yardstick  used  as  a stand- 
ard of  length.  But  if  it  were  the  nature  of  articles 
whose  lengths  are  measured  by  the  yardstick  to  change 
in  length  as  they  change  in  value  it  would  make  no 
difference  how  much  the  yardstick  itself  might  length- 
en or  shorten.  Like  the  standard  of  value  it  could 
serve  as  a measure  only  at  the  moment  when  the  arti- 
cles traded  for  were  compared.  Fluctuations  in  the 
values  of  commodities  have  nothing  to  do,  therefore, 
with  the  selection  of  a standard,  nor  is  it  possible  or 
desirable  to  invent  money  which  will  release  its  holder 
from  risks  due  to  those  changes  in  value  to  which  all 
wealth  is  subject. 


10 


MONEY  AND  CURRENCY. 


There  can  not  in  the  nature  of  things  be  more  than 
one  standard  of  value  at  one  time.  The  demand  for 
a double  standard  winch  is  heard  so  often  from  the 
advocates  of  the  free  coinage  of  two  metals  at  a ratio 
fixed  by  law  is  one  of  those  curious  contradictions  in 
terms  which  result  from  loose  thinking.  It  is  within 
the  power  of  a government  to  issue  different  kinds  of 
money  measured  by  different  standards  of  value  but 
it  is  not  within  its  power  to  keep  them  in  circulation. 
This  was  shown  when  congress  declared  the  coin  value 
of  gold  to  silver  should  be  as  1 to  15.  The  market 
ratio  becoming  1 to  15J  the  gold  currency  disap- 
peared until,  in  1836,  the  proportion  was  changed  to 
1 to  16,  after  which  the  gold  issue  continued  to  cir- 
culate, and  the  silver  was  withdrawn.  Should  the  free 
coinage  of  dollars  containing  371  grains  of  pure  silver 
be  authorized  now,  at  the  legal  ratio  to  gold  of  16  to 
1,  the  market  ratio  being  about  22  to  1,  the  inevit- 
able result  would  be  that  dollars  containing  23J-  grains 
of  pure  gold  would  at  once  go  to  a premium  and  out 
of  circulation.  This  would  not  be  the  result  of  the 
so-called  financial  paradox  of  Gresham  that  bad 
money  drives  out  good,  but  of  the  commonsense  fact 
that  no  man  will  offer  one  kind  of  bullion  for  coinage 
into  dollars  when  he  can  pay  his  debts  with  dollars 
of  another  kind  of  bullion,  procurable  with  one-fifth 
less  effort. 

The  owners  of  silver  would  not  as  is  often  asserted 
receive  the  difference  in  value  between  25  8-10  stand- 
ard gold  and  412J  grains  standard  silver.  They  would 
deliver  to  the  government  a certain  quantity  of  silver 
bullion  and  for  it  they  would  receive  a standard  silver 
dollar  or  silver  certificate  worth  just  that  amount  of 
bullion  in  the  market. 

The  present  law  which  calls  for  the  purchase  of 
4,500,000  ounces  of  silver  per  month  ismucli  more  to  the 
interest  of  the  owners  of  silver  than  free  coinage  would 
be,  for  under  this  act  the  government  must  buy  an 
immense  quantity  of  silver  while  there  is  no  reason 


MONEY  AND  CURRENCY. 


11 


to  believe  that  any  great  amount  would  be  demanded 
under  free  coinage.  The  free  coinage  of  silver  at  the 
present  legal  ratio  with  gold  would  have  the  following 
results: 

A decline  in  the  value  of  silver  caused  by  the. 
stoppage  of  government  purchases. 

A change  from  the  gold  to  the  silver  standard. 

A repudiation  of  at  least  20  per  cent,  on  all  exist- 
ing contracts  payable  in  “dollars.” 

An  imme  liate  advance  in  the  price  of  all  commod- 
ities. 

A heavy  reduction  in  the  purchasing  power  of  all 
iixed  wages  and  for  a time  a reduction  in  the  wages  of 
all  employees. 


CHAPTER  III. 

PRIVATE  ISSUES  OF  MONEY. 

As  civilization  progresses  exchange  develops  from 
the  barter  of  the  savage  until  as  we  see  to-day  practi- 
cally all  trade  is  effected  by  the  use  of  money,  issued 
either  by  individuals  or  by  governments.  Checks, 
drafts,  notes  and  the  various  evidences  of  indebtedness 
in  commercial  transactions  with  the  use  of  which  the 
government  is  not  concerned,  are  private  issues  of 
money. 

It  is  estimated  that  in  the  United  States  more  than 
92  per  cent,  of  domestic  exchanges  are  made  wTith  such 
money,  which  in  large  transactions  is  used  almost  ex- 
clusively, and  it  is  strange  that  in  discussing  the 
volume  of  money  required  for  the  business  of  the 
country  the  importance  of  these  always  available  pri- 
vate issues  is  ignored  or  belittled.  Yet  they  must  al- 
ways remain  the  chief  instrument  in  effecting  ex- 
changes for,  being  capable  of  instant  expansion  or  con- 


12 


MONEY  AND  CURRENCY. 


traction,  their  volume  varies  with  the  varying  needs  of 
a business  community  as  the  volume  of  government 
money  cannot. 

Notwithstanding  the  importance  of  these  private  is- 
sues the  United  States  Government  attempts  to  restrict 
them  in  favor  of  the  National  Banks  and  this  unjusti- 
fiable interference  is  defended  on  the  ground  that  it  is  a 
protection  to  the  ignorant  and  helpless  who  would  be 
defrauded  by  wildcat  banking.  But  such  restrictions 
are  an  absolute  denial  of  equal  freedom  and  the  tax 
of  ten  per  cent,  which  the  United  States  imposes  upon 
all  notes  intended  for  circulation  other  than  those  of 
the  National  Banks  is  either  useless  or  worse  than  use- 
less. It  was  intended  to  destroy  the  issues  ©f  the  State 
Banks  and  did  destroy  them  and  it  is  probable  that  if 
any  banking  association  were  to  issue  similiar  notes  to- 
day the  courts  would  exact  this  prohibitory  tax  as 
authorized  in  the  following  statute:  “ Every  person, 
firm,  association  other  than  National  Banking  Associa- 
tions, and  every  corporation,  State  Bank  or  State  Bank- 
ing Association  shall  pay  a tax  of  ten  per  centum  on 
the  amount  of  their  own  notes  used  for  circulation  and 
paid  out  by  them.” 

The  impossibility  of  strictly  enforcing  such  a law  is 
plain.  Under  its  provisions  every  note  issued  is  sub- 
ject to  this  tax,  for  the  moment  a note  leaves  its 
maker’s  hands  it  begins  to  circulate,  and  the  absolute 
enforcement  of  such  an  act  would  destroy  eyerv  form 
of  private  money  as  well  as  the  bank  issues  at  which 
it  was  aimed.  In  this  dilemma  the  position  which 
the  courts  are  compelled  to  take  is  absurd  in  the  ex- 
treme. The  Philadelphia  and  Reading  Railroad  Com- 
pany issued  notes  to  its  employees  called  “ wages  cer- 
tificates” and  these  notes  circulated  widely  through 
the  territory  traversed  by  the  road.  It  was  claimed 
they  should  be  taxed  ten  per  cent,  under  the  Federal 
Statute  but  in  the  case  of  the  P.  & R.  R.  R.  vs.  Pol- 
lock the  decision  of  the  Uni  ed  States  Court  may  be 
gathered  from  the  following  notes  on  the  statute  re- 


MONEY  AND  CURRENCY. 


13 


ierred  to  : “ Certificates  of  indebtedness  issued  by  a per- 
son or  corporation  are  not  taxable  as  ( circulation 7 un- 
less they  are  intended  to  be  used  or  circulate  as  moneys 
— nor  is  a promise  in  this  form  6 Due  the  bearer  $1.00 
in  goods  at  our  store  7 — nor  generally  is  an  order  pay- 
able in  merchandise  or  obligations  called  ( wages  cer- 
tificates’ liable  to  tax  as  notes  used  for  circulation. 
And  the  fact  that  notes  issued  or  certificates  issued  by 
a company  but  not  intended  for  circulation  are  so  used 
by  others  does  not  affect  the  character  imposed  upon 
them  by  the  company/7 

Which  decision  amounts  to  this — in  some  cases  is- 
sues of  notes  are  taxable  but  in  other  cases,  in  all  re- 
spects similiar,  such  issues  are  not  taxable.  No  real 
difference  exists  between  the  “wages  certificates77  of  the 
Railroad  Company  and  the  notes  issued  by  banking 
associations.  Both  are  private  issues  of  notes  intended 
to  circulate  among  those  willing  to  accept  them  and 
both,  in  so  far  as  they  did  circulate,  were  money  and 
exactly  the  same  kind  of  money.  But  meaningless  as 
the  decision  of  the  court  is  it  is  the  only  thing  that 
can  be  said  under  the  statute  for,  since  more  than  nine- 
tenths  of  our  exchanges  are  made  by  means  of  private 
money,  tne  enforcement  of  what  the  law  actually  de- 
mands is  too  absurd  to  be  seriously  thought  of. 


CHAPTER  IV. 

GOVERNMENT  ISSUES  OF  MONEY. 

It  is  possible  to  imagine  the  collection  of  revenue  for 
common  expenses  in  commodities  or  in  private  issues  of 
money,  but  to  collect  taxes  fairly  in  goods  would  be 
well  nigh  impossible,  while  the  use  of  private  money 
would  entail  risks  which  expressed  in  discounts  and 


14 


MONEY  AND  CURRENCY. 


premiums,  would  result  in  injustice  and  no  reason  ap- 
pears why' the  community  collectively  should  be  denied 
the  advantage  which  they  have  as  individuals  in  is- 
suing promises  to  pay  as  mediums  of  exchange.  By 
government  money  all  citizens  are  placed  on  an  equal- 
ity in  dealings  with  the  government  and  public  busi- 
ness is  facilitated  and,  as  the  proper  functions  of  the 
State  are  only  those  which  are  necessary  to  secure  the 
freedom  of  the  individual,  there  are  no  other  valid  rea- 
sons for  its  issuance 

The  widest  difference  of  opinion  on  the  currency 
question  is  as  to  the  amount  of  government  money  that 
should  be  issued.  Economists  usually  ignore  this 
problem  or  make  ludicrous  guesses  at  some  arbitrary 
sum  per  capita  of  population  nor  is  there  any  agree- 
ment between  those  politicians  who  by  reason  of  a long 
series  of  blunders  in  law  making,  are  known  as 
“ financiers.”  So  general  is  ignorance  as  to  the  nature 
and  functions  of  money  that  many  people,  overlooking 
private  issues  altogether,  think  exchanges  would  be 
impossible  without  government  money  and  assume  as 
a consequence  that  the  prosperity  of  a country  is  pio- 
portional  to  the  amount  of  currency  in  circulation  and, 
strangely  enough,  this  belief  prevails  largely  among 
protectionists  who  strive  to  stimulate  by  an  increase  of 
government  money  the  trade  impeded  by  tariffs. 

In  support  of  this  idea  it  is  gravely  alleged  that 
every  exchange  involves  the  direct  use  of  currency 
and  therefor  the  number  of  exchanges  possible  in  a 
community  is  limited  by  the  amount  of  currency  in 
circulation.  This  is  plausible  to  those  not  accustomed 
to  commercial  life  but  its  fallacy  is  apparent  when  we 
consider  the  inventions  which  have  been  utilized  in 
large  transactions  to  lessen  or  do  away  with  the 
need  for  government  money.  The  use  of  checks  and 
drafts  in  connection  with  banking  associations  has  be- 
come so  general  in  the  business  community  that,  as  a 
rule,  merchants  of  to-day  handle  no  currency  at  all 
except  that  which  is  necessary  for  pocket  money.  The 


MONEY  AND  CURRENCY. 


15 


government  accepts  the  checks  of  individuals  in  pay- 
ment of  certain  taxes,  in  the  larger  cities  even  in  pay- 
ment of  import  duties,  and  through  the  clearing-house 
system,  so  generally  adopted  by  the  banks,  the  trans- 
actions of  a day  may  amount  to  many  millions  of  dol- 
lars and  be  settled  with  a few  thousands  of  currency. 
These  inventions  will  undoubtedly  be  carried  still  fur- 
ther, yet  the  assertion  is  constantly  made  that  the 
country  requires  sufficient  government  money  to  trans- 
act all  business  on  a cash  basis. 

Equally  false  is  the  belief  that  the  volume  of  cur- 
rency fixes  the  price  of  commodities.*  'While  few 
venture  the  absurdity  that  doubling  the  quantity  of 
currency  would  make  prices  twice  as  high  still  it  is 
assumed  in  an  indefinite  way  that  some  such  relation 
is  necessarily  involved.  Yet  plainly  the  price  of  any 
article,  its  value  expressed  in  money,  is  fixed  by  its 
relation  in  the  market  to  the  commodity  accepted  as  a 
standard  of  value  ; to  say  that  the  price  of  a jack  knife 
is  half  a dollar  is  to  say  that  it  exchanges  for  one- half 
of  25  8-10  grains  of  gold  90  per  cent,  pure,  the  pres- 
ent standard  in  the  United  States.  This  price  can 
change  only  as  the  mutual  relation  of  gold  and 
jack-knives  changes  in  the  market  and  the  amount  of 
currency  in  circulation  can  effect  this  only  to  the 
slight  extent  due  to  using  the  commodity  chosen  as  the 
standard  for  the  material  of  currency. 

Of  course  a depreciation  of  currency  means  a rise 
in  prices  proportional  to  its  fall  below  s.andard  but 
when  currency  begins  to  depreciate  a further  increase 
in  its  quantity  is  not  necessarily  an  increase  in  the  ef- 
fective medium  of  exchange. 

**‘Tiiat  commodities  will  rise  and  fall  in  price  in  proportion  to 
the  increase  or  diminution  of  money  I assume  as  a fact  that  is  in- 
to itrovertible.  That  such  would  be  the  case  the  most  celebrated 
writers  on  political  economy  are  agreed.” — Ricardo.  • 

“If  the  whole  volume  of  money  in  circulation  were  doubled 
prices  would  double.  If  it  was  only  increased  one-fourth  prices 
would  rise  one-fourth.” — John  Stuart  Mill. 

“That  prices  will  fall  or  rise  as  the  volume  of  money  be  in- 
creased or  diminished  is  a law  that  is  as  unalterable  as  any  law  of 
nature.” — Prof.  Walker. 


16 


MONEY  AND  CURRENCY. 


Another  widespread  error  is  the  belief  that  the  vol- 
ume of  currency  governs  the  rate  of  interest  at  which 
money  is  loaned.  Commercial  interest  as  distinct 
from  insurance  against  risk  is  simply  a premium  paid 
by  one  party  to  an  exchange  for  the  privilege  of  defer- 
ring payment  and  as  such  would  continue  if  all  money 
were  destroyed  and  all  exchange  reduced  to  barter. 
Money  is  never  hired  for  itself  but  for  the  wealth 
which  it  will  buy  and  will  never,  however  plentiful, 
be  loaned  for  less  hire  than  can  be  obtained  for  that 
amount  of  wealth.  The  minimum  rate  of  interest  is 
thus  a question  of  wealth  and  not  of  money.  Re- 
strictions upon  the  issuance  of  money  tend  to  increase 
the  rate  of  interest  toward  a premium  representing  the 
advantage  of  exchange  by  money  over  exchange  by 
barter  but  those  who  claim  that  this  tendency  has  any 
result  worth  consideration  forget  that  such  laws  cannot 
be  enforced.  Their  main  objection  is  to  the  ten  per 
cent,  tax  on  circulation  but  this  is  of  so  little  effect 
that  the  States  pass  laws  of  their  own  in  attempting  to 
suppress  store  orders  and  wages  certificates  and  unless 
interest  rates  since  its  enactment  twenty- eight  years 
ago  can  be  shown  to  differ  from  rates  prior  to  its  pas- 
sage there  is  no  warrant  for  believing  they  will  be  af- 
fected by  its  repeal,  senseless  as  the  law  is.  While  the 
commodity  selected  as  a standard  of  value  is  itself  used 
as  a medium  of  exchange  and  coined  into  currency  on 
demand  the  hire  of  that  currency  cannot  exceed  the 
hire  of  the  bullion  and  therefore  no  scarcity  of  cur- 
rency can  raise  the  rate  of  interest  more  than  momen- 
tarily, 

A lthough  government  money  may  be  most  conveni- 
ent for  certain  transactions  between  individuals  such 
use  is  not  its  reason  for  being.  Other  monies  were 
current  before  government  issues  were  thought  of  and 
to  this  day  government  money  has  no  part  in  the  enor- 
mous volume  of  foreign  trade. 

The  lack  of  confidence  and  consequent  shrinkage  of 
credits  which  characterize  periods  of  financial  depres- 


MONEY  AND  CURRENCY. 


17 


sion  evidently  have  no  connection  with  the  amount  of 
currency  in  circulation  for  such  catastrophies  con- 
stantly recur  in  all  so-called  civilized  countries  and 
under  all  monetary  systems.  An  increase  of  currency 
does  not  tend  to  restore  confidence  at  such  times  and 
may  so  affect  even  government  credit  as  to  increase  the 
general  distrust.  A government  may  go  on  issuing 
promises  to  pay  but  after  the  safety  line,  its  taxing 
power,  is  passed  the  danger  of  depreciation  is  always 
present  and  a government  note  is  at  best  only  a form 
of  public  debt.  In  fixing  a limit  to  government  issues 
it  must  be  borne  in  mind  that  their  only  right  purpose 
is  the  transaction  of  public  business  and,  except  to  ad- 
vocates of  state  socialism,  the  quantity  of  such  notes 
must  necessarily  be  limited  to  the  amount  necessary 
for  the  collection  of  taxes.  To  exceed  the  budget  is 
to  embark  on  a piratical  cruise  upon  the  dangerous  sea 
of  inflation  ; it  is  obedience  to  demands  which  are  in- 
satiable and  the  probable  result  is  financial  shipwreck. 
Even  now,  with  upwards  of  fifteen  hundred  millions  of 
•dollars  of  government  money  in  circulation,  the  cry  for 
more  is  louder  than  ever. 

Of  course  this  answers  the  question,  u How  should 
currency  be  put  in  circulation  ? ” ft  is  strange  that 
such  should  ever  have  been  asked,  but  in  these  days  of 
bounties  and  pension  grabs,  when  many  people  are  ad- 
vocating the  establishment  of  government  pawnshops, 
it  may  be  well  to  point  out  that  there  is  only  one  hon- 
est way  to  get  the  people’s  notes  into  circulation. 
There  are  three  ways  proposed— 1st.  They  can  be  given 
away  as  is  done  in  the  case  of  bounties  and  pensions.  2d. 
They  can  be  loaned  as  they  are  now  loaned  to  the  national 
banks,  and  as  they  would  be  if  the  Sub-Treasury  scheme 
were  adopted  or  the  various  plans  for  lending  to  land- 
lords. 3d.  They  can  be  used  in  the  purchase  of  labor  or 
commodities  necessary  to  support  the  government.  Of 
course  the  last  way  is  the  only  one  that  is  justifiable, 
and  the  multitude  of  schemes  by  which  it  is  proposed 
to  give  away  government  money  or  lend  it  at  a noraina- 


MONFY  AND  CURRENCY. 


rate  do  not  recognize  the  fact  that  currency  is  only 
valuable  so  far  as  the  taxing  power  of  the  state  is 
pledged  to  its  redemption.  A government  note  is  like 
a government  bond,  a lien  upon  the  property  of  the 
people,  and  an  individual  might  just  as  reasonably  ask 
that  the  people  should  be  taxed  for  his  benefit  as  ask 
that  the  people’s  promises  to  pay  should  be  given  to 
him  except  in  exchange  in  the  open  market. 


CHAPTER  Y. 

THE  BEST  CURRENCY. 

Rut  two  substances  are  suggested  as  the  material  for 
currency — metal  and  paper — and  it  is  useless  to  debate 
whether  gold  or  silver  should  be  used  if  paper  can  be 
shown  to  be  superior  to  either.  As  gold,  silver  and 
paper  have  each  their  advocates  two  parties  to  the 
dispute  must  be  wrong. 

One  seldom  hears  an  argument  for  a gold  currency 
pure  and  simple,  but  the  strength  of  the  gold  idea  lies 
in  the  belief  that  every  piece  of  money  should  contain 
bullion  equal  to  its  face  value.  This  is  the  thought 
which  underlies  the  phrase  “an  honest  dollar”  and  at 
a certain  stage  of  civilization*  where  confidence  in  a 
government  is  weak  it  is  undoubtedly  better  that  a 
money  token  should  have  a full  commodity  value 
in  spite  of  the  enormous  waste  thereby  involved  * 

* “Barbarians  do  not  want  any  money  but  hard  money;  semi- 
•civilized  people  want  hard  money  and  convertible  paper;  but  when 
the  wo  rid  becomes  civivilized  and  enlightened  no  other  kind  of 
money  will  be  used  but  paper  money."’  — Herbert  Spencer. 

*.Tevons  in  Chap.  XIII  of  his  work  on  money  estimates  the  an- 
nual loss  from  wear  on  English  coins  at  $240,000.00. 


MONEY  AND  CURRENCY. 


19 


But  there  is  no  argument  for  such  a currency  in  a 
firmly  established  state.  The  purchase  of  gold  by 
government  in  order  that  it  may  be  made  into  coin  is 
as  objectionable  as  the  purchase  of  silver  and  for  the 
same  reasons;  it  enhances  the  price  of  the  commodity 
by  favoring  owners  of  bullion  at  the  expense  of 
consumers  and  compels  the  withdrawal  of  so  much 
wealth  from  production.  It  involves  the  loss  from 
wear  already  referred  to,  and  it  results  in  a currency 
too  heavy  and  clumsy  for  general  use. 

The  plea  for  silver  is  the  gold  argument  varied  with 
the  assertion  that  there  is  not  enough  gold  to  supply 
the  quantity  of  currency  needed  but  the  loudest  de- 
mand for  increased  silver  coinage  in  this  country  comes 
from  certain  patriotic  citizens  with  silver  to  sell.  Their 
motives  are  so  apparent  that  their  influence  would 
avail  little  except  for  the  widespread  belief  that  national 
prosperity  is  dependent  upon  the  amount  of  currency 
in  circulation.  Every  valid  objection  to  a gold  cur- 
rency applies  with  equal  or  greater  force  to  a silver 
currency. 

The  use  of  pap*r  money  in  place  of  metal  is  one  of 
the  greatest  labor-saving  inventions.  It  does  away 
with  the  necessity  of  keeping  valuable  commodities 
from  productive  use  and  thus  saves  the  community  the 
loss  of  so  much  capital.*  So  far  as  national  wealth  is 
concerned  it  would  not  be  lessened  by  the  destruction 
of  every  dollar  of  paper  currency  except  to  the  extent 
of  such  a quantity  of  printed  paper.  Thus  waste  from 
wear  is  practically  reduced  to  a minimum  by  the  use 
of  paper  currency  and  no  special  advantage  results  to 
any  class  or  individuals  such  as  is  obtained  by  the 
owners  of  bullion  when  the  government  enters  the 
market  as  a purchaser.  But  the 'strongest  argument 

"Excluding  subsidiary  coins  the  total  stock  of  gold  and  silver 
coin  in  this  country  on  May  1st,  1891,  was  about  $1,030,000,000. 
This  represents  so  much  wealth  withdrawn  from  production,  an  l 
estimating  interest  as  low  as  3 per  cent,  involves  a yearly  loss  to 
the  people  as  a whole  of  more  than  $30,000,000. 


20 


MONEY  AND  CURRENCY. 


for  paper  is  that  it  makes  the  most  convenient  currency 
to  handle.  So  strong  is  the  desire  for  notes  as  a mat- 
ter of  convenience  that  our  government  has  been  com- 
pelled to  adopt  them  as  a substitute  for  coin  in  the 
form  of  gold  and  silver  certificates  Although  the 
bullion  and  coin  held  as  a basis  for  the  issue  is  far  less 
than  the  face  value  of  the  certificates  most  people  im- 
agine that  the  notes  would  depreciate  if  the  metal  was 
put  to  some  use.  Nevertheless  it  is  difficult  to  under- 
stand how  the  bullion  deposits  secure  the  notes  for  if 
anything  should  happen  to  the  government  it  is  hardly 
probable  that  the  holders  of  the  certificates  would  ever 
get  hold  of  the  gold  or  silver  supposed  to  make  them 
safe.  What  keeps  these  nopes  on  a par  with  gold  is 
not  the  bullion  held  at  Washington  but  the  fact  that  a 
solvent  government  stands  ready  to  redeem  them,  as  a 
single  illustration  will  prove.  The  standard  silver 
dollar  contains  412J  grains  of  silver  and  the  trade 
dollar  420  grains  yet  the  former  passes  everywhere  in 
this  country  at  par  with  the  gold  dollar,  which  has 
some  20  per  cent,  great  bullion,  value,  while  the  latter 
will  pass  only  for  about  80  cents.  This  is  simply  be- 
cause the  United  States  Government  receives  a stand- 
ard dollar  as  the  equivalent  of  25  8-10  grains  of  gold 
but  refuses  to  receive  the  trade  dollar  as  such.  There 
is  nothing  to  be  gained  by  our  absurd  system  of  dig- 
ging metal  out  of  the  ground  in  one  part  of  the  coun- 
try in  order  to  haul  it  hundreds  of  miles  and  bury  it 
in  another  part  of  the  country.  So  far  as  concerns 
currency  it  is  neither  necessary  nor  desirable  that  the 
government  should  hold  any  metal  at  all. 

The  reasons  which  justify  a paper  currency  prove 
that  silver  is  not  the  best  material  for  subsidiary  coins. 
Commodity  value  in  ’snch  currency  is  as  useless  as  in 
that  of  larger  denominations,  and  wearing  qualities 
alone  should  be  considered.  Any  metal  or  alloy  which 
is  most  convenient  and  will  last  longest  will  serve  best 
for  the  fractional  coins. 


MONEY  AND  CURRENCY. 


21 


Although  it  is  true  that  paper  is  the  best  material 
for  currency  it  does  not  follow  that  any  kind  or  quan- 
tity of  notes  may  be  issued  successfully.  The  first 
essential  is  that  the  government  should  be  firmly 
established,  and  its  power  to  appropriate  wealth  by 
taxation  assured.  The  lack  of  such  certainty  depre- 
ciated the  notes- of  the  Confederacy  and  the  assignats 
of  the  French  Revolution. 

Furthermore  the  amount  issued  must  be  within  the 
government’s  power  of  redemption.  There  is  a limit 
to  the  revenue  of  the  strongest  government  and  as 
this  revenue  is  ihe  only  security  for  its  notes  it  cannot 
goon  issuing  notes  indefinitely  with  the  expectation 
that  they  will  be  accepted  at  their  face  value.  Govern- 
ment credit  rests  upon  the  same  basis  as  individual 
credit  and  confidence  in  its  promissory  notes  canonly  ex- 
ist while  the  amount  issued  is  safely  within  the  power 
of  the  government  to  redeem  in  commodities  or  tax  re- 
receipts. It  was  because  of  such  an  over-issue  that  the 
cedulas  of  the  Argentine  Republic  were  discredited  and 
this  limit  to  government  credit  is  one  of  the  causes 
which  make  impracticable  all  schemes  for  the  general 
loaning  of  government  money. 

Finally  government  notes  must  be  receivable  in  pay-, 
ment  of  taxes.  The  refusal  to  receive  greenbacks  in 
payment  of  duties  on  imports  caused  the  depreciation 
of  those  notes  during  the  civil  war.  This  crime 
was  perpetrated  by  a few  alleged  financiers  who 
thought  it  would  be  a great  thing  for  the  government 
to  pay  out  notes  and  refuse  to  receive  anything  but 
gold.  Contrary  to  popular  belief  the  depreciation  of 

*As  a matter  of  fact  Ii« 1 1 e gold  or  silver  can  be  forced  into  cir- 
culation if  people  can  obtain  notes.  The  Treasury  statement  for 
May  1,  1891,  slows  in  round  numbers: 


IN  TREASURY.  IN  CIR CI  LATI ON. 

Gold 8220,000,000.00  8 b '8,000,000. 00 

Silver 838,000,000  00  01. 000, 000.00 

Paper 39,000,000.00  1,001  000,000.00 


This  is  particularly  striking  as  regards  silver.  Most  of  the 
gold  is  held  by  banking  institutions. 


22 


MONEY  AND  CURRENCY. 


the  greenbacks  was  not  chiefly  dne  to  lack  of  confidence 
in  the  stability  of  the  government  but  to  the  fact  that  the 
notes  were  not  received  for  customs  duties.  This  left 
only  the  internal  revenue  taxes  as  a channel  for  theij 
redemption  and  as  the  revenues  raised  in  this  way  were 
comparatively  small  the  notes  depreciated.  That  this 
was  the  reason  is  proved  conclusively  by  the  fact  that 
the  demand  notes  of  which  $60,000,000.00  were  issued 
in  1861-2  and  which  were  received  in  payment  of  im- 
port duties  circulated  o i an  equality  with  gold  during 
much  of  the  time  when  the  greenbacks  were  depreciated. 

The  proper  form  of  government  money  in  this  coun- 
try would  read  to  this  effect: 


ONE  DOLLAR. 

The  United  States  agrees  to  receive  this  note 
as  the  equivalent  of  25  8-10  grains  of  gold  900 
fine  in  payment  of  any  debt  due  the  United 
States. 


CHAPTER  VI. 

THE  SOLUTION  OF  THE  MONEY  PROBLEM. 

For  ages  men  have  disputed  whether  the  rent  of 
land  should  go  to  the  landlord  or  the  tenant  but  the 
real  question  is  whether  it  should  go  to  any  individual 
or  to  the  community.  For  years  they  have  debated  the 
relative  merits  of  protective  tariffs  and  revenue  tariffs 
but  the  real  issue  is  between  absolute  free  trade  and  any 
tariff  whatever.  So  to-day  volumes  are  written  on  the 
comparative  excellences  of  gold  and  silver  currencies 
when  the  real  verdict  must  be  between  all  forms  of 
money  having  commodity  value  on  the  one  hand  and 
purely  token  money  on  the  other — simply  a question 
whether  a community  is  sufficiently  civilized  to  do 
business  by  bookkeeping. 


MONEY  AND  CURRENCY. 


23 


But  without  regard  to  differences  as  to  kinds  of 
money  those  who  dispute  the  currency  question  are  di- 
vided into  two  factions,  one  advocating  an  increase  of 
government  money  and  ascribing  unspeakable  evils  to 
its  so-called  contraction,  the  other  opposing  with  simi- 
lar prophesies  of  horrors  to  come  any  further  issuance 
of  money  whether  public  or  private. 

Yet  both  parties  are  alike  wrong;  the  one  has  not 
shown  that  government  can  rightly  issue  money  excej  t 
for  the  transaction  of  its  own  business,  the  other  has 
not  shown  that  government  can  rightly  interfere  to 
prevent  indviduals  from  issuing  what  money  they  will. 
Neither  has  shown  that  the  volume  of  money,  even 
were  it  as  important  as  each  erroneously  accounts  it, 
is  a matter  with  which  the  government  has  any  con- 
cern whatever.  Neither  recognizes  that  the  inelastic 
supply  of  mediums  of  exchange  and  the  complications 
due  thereto  would  be  paralleled  by  an  inelastic  supply 
of  bibles  or  bootjacks  did  the  government  undertake 
or  restrict  the  production  of  these  articles  as  it  does 
the  production  of  money. 

Yet  the  cause  of  such  differences  of  opinion  and  the 
way  to  remove  them  are  not  hard  to  understand.  It 
is  simply  that  while  present  social  conditions  continue 
there  is  no  solution  to  the  money  problem  and  when 
these  conditions  are  set  right  it  will  solve  itself. 

For  by  far  the  most  important  point  to  understand 
about  the  money  question  is  its  unimportance.  Under 
all  forms  of  currency  the  mass  of  wealth  producers  are 
condemned  to  poverty,  bitter,  degrading  and  hopeless, 
and  to  him  who  is  sure  to  be  eaten  the  sauce  with 
which  he  is  served  up  is  of  little  account.  What  will 
a better  currency  profit  him  who  must  give  all  he  gets 
of  it  for  a bare  living?  What  is  the  need  of  a better 
medium  of  exchange  to  a people  who  expect  prosperity 
only  as  they  prevent  exchange  by  tariffs?  What  matters 
the  control  of  the  representatives  of  wealth  so  long  , as 
the  source  of  all  wealth  is  itself  monopolized? 

The  most  ardent  advocates  of  the  various  schemes 


24 


MONEY  AND  CURRENCY. 


of  finance,  our  infallible  newspapers,  our  best  adver- 
tised statesmen,  can  give  no  answer  to  the  currency 
problem  because  from  whatever  side  the  subject  is  ap- 
proached the  way  is  blocked  by  restrictive  laws  they 
dare  not  repeal.  Each  of  such  restrictions  is  thought, 
however  wrongly,  to  be  a safeguard  to  the  poor;  each 
with  all  its  evil  effects  is  the  necessary  result  of  an  evil 
cause,  that  certain  people  who  have  no  freedom  of 
choice,  no  power  to  help  themselves,  depend  for  pro- 
tection upon  legislative  acts. 

On  the  plea  that  people  have  been  swindled  by  wild 
cat  banking  all  banks  of  issue  other  than  the  national 
banks  are  prohibited  by  the  ten  per  cent,  tax  on  circu- 
lation; because  wages  in  some  occupation  have  touched 
the  starvation  line  laws  are  passed  forbidding  store 
orders  and  piyment  in  go>ds;  because  some  employer 
is  able  to  force  worthless  money  upon  his  employes 
legal  tender  acts  are  demanded;  for  further  protection 
values  and  prices  are  manipulated  by  tariffs  and  the 
whole  course  of  business  is  interrupted  by  the  abortive 
attempts  of  government  to  enforce  contracts  between 
individuals.  Of  course  the  ignorance  of  the  few  who 
oppose  certain  of  these  restrictive  laws  has  ascribed  to 
them  many  evil  results  which  they  could  not  possibly 
effect  but  it  is  wholly  owing  to  such  statutes  that 
there  is  any  confusion  in  regard  to  money.  All  are 
thoroughly  bad  in  principle  and  should  be  abolished 
at  once  and  forever.  They  have  been  enacted  by 
selfish  interests  with  the  same  clamor  about  protecting 
the  poor,  the  weak  and  the  ignorant  which  makes 
millionaires  at  public  expense  by  tariffs.  Patch- 
work  attempts  to  make  them  harmless  by  further 
legal  interference  only  add  to  the  evil.  Such  are  the 
usury  laws  which  attempt  to  limit  the  amount  of  law- 
ful hire  but  that  which  galls  the  people  into  such  sense- 
less revolt  is  the  interest  paid  on  land  mortgages  and 
the  public  debt  and  there  the  wrong  is  deeper  than  any 
question  of  the  amount  of  hire;  the  outrage  is  that  the 
debt  was  ever  created  at  all,  that  any  man  should  be 


MONEY  AND  CURRENCY. 


25 


compelled  to  pay  another  for  that  use  of  the  earth 
which  is  rightly  his  own  by  reason  of  his  right  to  live. 

In  short  the  one  source  of  the  money  trouble  is  the 
interference  of  government  with  the  affairs  of  individ- 
uals, the  reason  of  such  interference  is  the  poverty  of 
the  masses  and  the  ignorance  which  results  from  it  and 
the  cause  of  poverty  is  the  private  ownership  of  the 
only  source  of  wealth,  the  land. 

If  there  are  women  and  children  dying  of  hunger 
made  by  the  laws — and  he  who  know  anything  at 
all  knows  this — it  will  not  lighten  their  misery  or 
our  crime  who  are  responsible  for  the  continuance  of 
those  laws  to  have  the  statutes  relating  to  cur- 
rency made  perfect  “Skin  for  skin,  all  that  a man 
hath  will  he  give  for  his  life/5  was  the  conclusion 
of  a financier  who  wrote  in  the  days  when  hides 
were  cash  and  it  is  true  even  if  that  all* be  stand- 
ard dollars  of  the  United  States.  Money  is  but  a 
representative  of  wealth,  that  wealth  is  but  the  prod- 
uct of  labor  upon  land  and  now  as  ever,  “To  whom- 
soever the  soil  belongs  to  him  belong  the  fruits  of  it.55 


